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Some of the biggest names in apparel are looking to have exclusive clothing lines or partial lines sold through Macy’s. The Rachel by Rachel Roy line is being added, for example.

Lisa Biank Fasig

Staff Reporter

When Macy’s Inc. agreed in April to carry an exclusive clothing line by contemporary designer Rachel Roy, the deal had more to do with internal restructuring than hemlines and clutch bags.

The line, a division of Jones Apparel Group, came together as Macy’s was finalizing its national My Macy’s program, a merchandising strategy that puts the decision of what each store carries into the hands of a centralized operation in New York. The program – fielded across 69 geographic districts, each headed by a merchandiser and a planner – has cut the time it takes to make such decisions to days, from months.

The upshot: Macy’s is receiving an increased number of offers from designers and celebrities alike, each hoping it will carry their dresses, dishware or cologne.

“As a result of the centralized structure, we are getting even more offers to do exclusive lines or exclusive partial lines,” Karen Hoguet, Macy’s CFO, recently told analysts. “We do think that over time, based on the success of the ones we have, that will be a bigger part of our mix.”

Such exclusive lines from the likes of Martha Stewart, Donald Trump and Tommy Hilfiger account for more than 16 percent of Macy’s sales. Combine that with the merchant’s in-house brands – think I.N.C., Alfani and Hotel Collection – and they generated more than 35 percent of its 2008 sales of $25 billion. In 2003, Macy’s did not even bother to quantify the size of its national-brand, exclusive business.

The figure is likely to grow, said Dan Hess, CEO of Merchant Forecast in New York and a former director of marketing at Macy’s. As merchants consolidate and close locations – consider that Macy’s acquired its largest rival, May Department Stores, in 2005 – the biggest names in apparel are finding fewer customers with whom to negotiate deals.

“These brands have about half as many potential locations to place their merchandise in the United States as they did as little as five years ago,” Hess said. “They are eager to accommodate, especially a chain the size of Macy’s.”

And size does matter. Macy’s, having transformed itself into a coast-to-coast chain of roughly 810 Macy’s locations, is the biggest carrier of such brands as Liz Claiborne and Ralph Lauren. Claiborne, in its 2008 annual report, said Macy’s is the only retailer to account for more than 7 percent of wholesale sales – 13 percent. Yet that is down from 17 percent in 2007.

At Ralph Lauren, Macy’s in 2008 generated about 19 percent of sales. The New York designer in January 2007 launched a division, Global Brand Concepts, dedicated entirely to developing exclusive lines for retailers. In 2008, J.C. Penney launched a clothing and home goods brand, American Living, through the endeavor.

“It’s going to be the way things are done, probably more so,” said Rob Plaza, an independent, Chicago-based retail analyst. “You have more control of the costs, and you don’t have to pass along higher prices to customers because you have control of the costs.”

Inspiring results

Macy’s launched My Macy’s, as a pilot, in early 2008. Results were encouraging enough that the program was rolled out nationally, and Macy’s remaining regional divisions – in San Francisco, Atlanta and Miami – were shuttered. All merchandising operations were moved to New York, where executives receive merchandising requests and input from 69 planners and merchandisers, each of whom oversees roughly 10 stores.

The results continue to be inspiring. For the spring season, the My Macy’s districts outperformed the remaining stores by 2.6 percentage points, Hoguet told analysts. In the first half of the year, eight of Macy’s top-10 districts were My Macy’s pilot markets.

“As it’s now constructed, we’re able to very quickly make decisions in a much more streamlined manner than we have in the past,” Macy’s spokesman Jim Sluzewski said. “Rachel by Rachel Roy is a prime example. They approached us, we saw the potential in it and made the decision very quickly.”

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